U.S. Federal Reserve Beige Book: Minneapolis District (Text)

The following is the text of the Federal Reserve Board’s Ninth District-- Minneapolis.


The Ninth District economy experienced moderate growth since the last report. Increased activity was noted in consumer spending, tourism and professional services. Some significant parts of construction and real estate are growing at a double-digit clip. Activity in the energy and mining sectors continued at a rapid pace. District crop producers remained in mostly good shape, despite this year’s drought. Meanwhile, activity slowed slightly in the manufacturing sector. While labor markets continued to show signs of tightening in several areas, some layoff notices were reported. Overall wage increases were moderate, although stronger increases were reported in some areas. Price increases were generally modest.

Consumer Spending and Tourism

Consumer spending posted moderate gains. During the past two months, a Minnesota auto dealer reported strong sales activity for new vehicles and somewhat softer sales activity for used vehicles. A Minnesota-based restaurant and bar chain reported that recent same-store sales were up over 5 percent from last year. Same-store sales at a Minnesota-based retailer increased over 2 percent in October compared with a year ago. However, a mall manager in the Minneapolis area noted slight decreases in traffic and sales during September and October compared with last year. In Montana, a mall manager reported that sales were down slightly during September after a generally flat summer. Recent travel and tourism activity was above a year ago. Convention and tourism business in the Sioux Falls, S.D., area was trending above last year’s levels with prospects for a good 2013, according to an official. A travel agency in Minnesota noted that corporate and leisure travel sales in October were above year-ago levels. Travel and tourism activity in the Duluth, Minn., area was above last year, and businesses are optimistic for 2013, according to an official.

Construction and Real Estate

Commercial construction activity increased significantly since the last report. The permitted value of new commercial construction in October increased substantially from the same period last year in Sioux Falls and nearly quadrupled in Billings, Mont. A recent survey of Minnesota building professionals conducted by a trade association noted an improvement in market conditions. Residential construction increased from a year ago. The value of October residential building permits in the Sioux Falls area was up 16 percent from last year. In the Minneapolis-St. Paul area, the value of October residential permits was up 70 percent compared with a year ago, while it tripled in Billings.

Commercial real estate markets expanded at a slow pace. A group of Minnesota commercial real estate investors and real estate professionals noted a recent uptick in activity and a reduction in vacancy rates since the last report. Residential real estate market activity increased. Home sales in October were up 15 percent from the same period a year ago in the Minneapolis-St. Paul area; the inventory of homes for sale was down 30 percent, and median sales prices rose 15 percent. In the Sioux Falls area, October home sales were up 19 percent, inventory was down 13 percent and the median sales price was flat relative to a year earlier.


Activity at professional business services firms grew since the last report. The aforementioned survey of building professionals revealed that 59 percent of engineers reported improving conditions compared with 16 percent who saw declines, while 36 percent of the architect respondents reported increases and 21 percent noted declines. A marketing consulting firm noted a large increase in demand from firms that are launching new products or services. Demand for scientific researchers increased for a large diversified manufacturing company. A logistics consulting firm noted some disruptions in rail traffic due to Hurricane Sandy.


Manufacturing slowed slightly since the last report. An October survey of purchasing managers by Creighton University (Omaha, Neb.) found that manufacturing activity decreased for a fourth straight month in Minnesota and South Dakota, but continued to increase in North Dakota. A wood-products facility in northern Minnesota closed. More than half of manufacturing respondents to a late-October Minneapolis Fed ad hoc survey reported that they had cut capital expenditures in the past six months. In contrast, an agricultural machinery producer announced a $20 million expansion to a facility in North Dakota, a Minnesota vehicle manufacturer announced a $20 million expansion and a plastic pipe producer broke ground on a new plant in South Dakota. A maker of outdoor gear is expanding its operations in Minnesota due to strong demand from the military.

Energy and Mining

Activity in the energy and mining sectors continued at a rapid clip. Oil and gas production remained at record levels, but exploration activity since the last report was flat in North Dakota and decreased in Montana. An oil pipeline operator announced capacity expansions on a pipeline in Minnesota and is considering construction of a high-capacity line from the North Dakota oil patch to Wisconsin. Sand mining growth continued; plans for a new loading facility in Minnesota were announced, along with plans for a rail depot in North Dakota. Iron mines in northern Minnesota remained busy, but production fell slightly from recent months.


District crop producers remained in mostly good shape, despite this year’s drought. Farm incomes were bolstered by high crop prices, and farmers were looking at record harvests in areas less affected by drought. However, livestock and dairy producers continued to suffer from higher input costs. Reports of ranchers culling herds due to low hay production and increased feed prices continued to surface. After years of delays, a South Dakota beef slaughter and processing plant began operations in October. Prices received by farmers for wheat, corn, soybeans, beef, dairy products and chicken increased in October from a year earlier; hog, dry bean, turkey and egg prices decreased.

Employment, Wages and Prices

While labor markets continued to show signs of tightening in several areas, some layoff notices were reported. According to the aforementioned survey of building professionals, 31 percent expect to hire more workers during the upcoming year compared with 18 percent in last year’s survey. Demand for nurses has picked up in western North Dakota. A representative of Montana State University noted that job prospects for graduates have improved. In Minnesota, a manufacturer of equipment used for transporting and storing natural gas as a liquid broke ground on an expansion that will add 80 jobs, and a paints and coatings manufacturer recently announced plans for an expansion that will create about 135 jobs. However, a dairy plant closing in Minnesota will lead to 130 job reductions by the end of the year, and an equipment manufacturer announced plans to close a plant, which will affect 100 jobs. Meanwhile, the closing of a pest control product plant in North Dakota will result in almost 150 job cuts.

Wage increases were moderate, with some exceptions noted. Reports of solid wage increases continued from the oil-drilling area of North Dakota, although the pace of growth has started to ease recently.

Overall price increases were modest. Minnesota gasoline prices decreased about 50 cents per gallon from early October to mid-November. Some metals prices also decreased since the last report. In contrast, a bank director noted that smaller cattle herds will likely keep beef prices elevated. A wood products industry observer noted some recent increases in prices for oriented strand board.

SOURCE: Federal Reserve Board

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